Reddit logos are seen displayed in this illustration taken February 2, 2021. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights, opens new tab
March 20 (Reuters) – Social media platform Reddit
priced its initial public offering at the top of its targeted range of $31 to $34 per share on Wednesday, raising $748 million and giving the ailing technology IPO market a much-needed boost.
Reddit and its existing shareholders sold 22 million shares at $34 a share, giving Reddit a valuation of about $6.4 billion.
To tap retail investors, Reddit reserved 8% of the total shares on offer for eligible users and moderators on its platform, certain board members and friends and family members of its employees and directors.
Excluding the shares sold by existing shareholders, Reddit raised gross proceeds of $519.4 million from its IPO. Reuters reported earlier on Thursday that Reddit and its bankers were guiding they could price the IPO at the top of the indicated range or above.
The top-end pricing is a vindication of the company’s decision to lower its valuation expectations, after it was valued at $10 billion in a private fundraising round in 2021.
The successful offerings of Reddit and Astera Labs
could boost the lackluster tech IPO market after two years of largely subdued activity. Earlier this year, the stock market launches of other big names including KKR-backed BrightSpring and sportswear brand Amer Sports received a lukewarm reception from investors.
LOYAL USER BASE
Despite the loyalty of many of its users, Reddit has lost money every year since its launch in 2005 and has lagged the commercial success of contemporaries such as Meta Platforms’
Facebook and Twitter, now known as X.
The focus of many Reddit users on niche subjects and the platform’s somewhat loose approach to content moderation has been a sticking point with some advertisers.
As it looks for new revenue sources, Reddit in February unveiled a $66 million contract to provide artificial intelligence training data to Alphabet’s Google
.
Reddit, however,
last week the U.S. Federal Trade Commission was conducting an inquiry focused on the company’s sale, licensing, and sharing of user-generated content with third parties to train AI models.
Reddit relies on volunteers from its user base to moderate the content posted on its forums.
Moderators can decide to withdraw from their duty at any time, as in 2023, when several quit in protest over Reddit’s decision to charge third-party app developers for access to its data.
Reddit’s 100,000 online forums, dubbed “subreddits,” allow conversations on topics ranging from “the sublime to the ridiculous, the trivial to the existential, the comic to the serious,” according to co-founder and chief executive Steve Huffman.
The company’s influential communities are best known for the “meme-stock” saga of 2021 when several retail investors collaborated on Reddit’s “wallstreetbets” forum to buy shares of highly shorted companies such as video game retailer GameStop
.
Reddit had an average of 73.1 million daily active “uniques” – users who use its platform at least once a day – in the three months ended Dec. 31, 2023, according to a regulatory filing.
Reddit’s shares are expected to start trading on the New York Stock Exchange on Thursday under the ticker ‘RDDT’.
Morgan Stanley, Goldman Sachs, JPMorgan Chase, and Bank of America are the lead underwriters for Reddit’s offering. Morgan Stanley also won the lead role on Astera’s IPO.
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Reporting by Echo Wang and Anirban Sen in New York; Editing by Greg Roumeliotis and Jamie Freed
Our Standards: The Thomson Reuters Trust Principles., opens new tab
Echo Wang is a correspondent at Reuters covering U.S. equity capital markets, and the intersection of Chinese business in the U.S, breaking news from U.S. crackdown on TikTok and Grindr, to restrictions Chinese companies face in listing in New York. She was the Reuters’ Reporter of the Year in 2020.
Anirban Sen is the Editor in Charge for U.S. M&A at Reuters in New York, where he leads the coverage of the biggest deals. After starting with Reuters in Bangalore in 2009, Anirban left in 2013 to work as a technology deals reporter in several leading business news outlets in India, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 as Editor in Charge, Finance to lead a team of reporters, covering everything from investment banking to venture capital. Anirban holds a history degree from Jadavpur University and a post-graduate diploma in journalism from the Indian Institute of Journalism & New Media.
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